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Congress approves VAT exemption for 5 foods

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Fine loin, goose and pheasant will no longer be considered foods in the exemption from the general sales tax (IGV). The full of Congress approved last night, with 95 votes in favor and 10 against, the proposal of the Executive in which it is specified that the products affected by the norm will be chicken, sugar, eggs, noodles and bread.

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In this way, it is expected to mitigate the effects of the rise in the price of basic foodstuffs on the daily spending of the most vulnerable families. Although a great absence was the oil, which was finally not considered.

Infographic – The Republic

the pros and cons

Specialists consulted consider that it is a favorable measure in the short term, but they warn that the benefit will not necessarily reach those who need it most.

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“There are two large groups that control the bulk of the agro-industrial products that are consumed in Peru, so how can we ensure that when the tax is lowered, these are not appropriated by intermediaries?” said economist Armando Mendoza.

The approved rule is valid for three months, which would be in force from May 1 to July 31 of this year. In this regard, Mendoza warned that great care must be taken so that this becomes an “acquired right.” It usually happens that when the term is about to expire, pressures begin from economic groups and thus can end with regulations that last 20 or 30 years and that have a high cost for the State, assured the specialist. “The government indicated that it would be S/ 3,200 million less in collection, that is a lot of money. Added to the lower collection due to the reduction of the selective consumption tax (ISC) of fuels, we are talking about almost one point less of the GDP in collection”, explained the specialist.

Finally, the economist points out that The IGV exoneration for food is made every year, but it is mostly directed to food produced in Peru. “In the case of this law, what is being done is to subsidize the consumption of imported products, instead of trying to promote the consumption of national products, such as potatoes,” he emphasized.

Supervision of the norm

The rule states that Indecopi will be the authority in charge of monitoring sales prices to the final consumer. On this point, Giorgio Balza, tax attorney for Cuatrecasas, explained that, from a legal and conceptual point of view, this institution does not have the capacity to verify the mobility of supply and demand. “The Indecopi could go to monitor whether prices have been lowered or not. But if someone hasn’t done it, he won’t be able to do anything,” Balza specified.

He added that where there would be a problem, it is in the generation of more informality. So that, when making a transaction, it is done without an invoice; that is, stop paying taxes. On this point, the supervisory role would be more important, the lawyer specified.

Business associations speak out against

The National Society of Industries (SNI) expressed concern about the proposal, since they assure that it will not have the desired effect, since it does not exempt the entire national production chain from VAT, on the contrary, “it will seriously affect mypes and farmers.”

It is argued that raw materials, intermediate goods and services have not been considered, and since sales of final products are not taxed, there will be a tax to be paid to the Sunat “much higher”.

For its part, the Peruvian Poultry Association (APA) has warned that “the rule does not give the possibility of requesting a refund in the event that the IGV paid on purchases cannot be applied as a tax credit,” they emphasized.

Infographic – The Republic

reactions

Silvia Monteza, president of the Economy Commission

“The proposal to which we acquiesce includes the departure of specific products such as chicken meat, eggs, noodles, bread and sugar. The IGV exemption is until July 31, 2022″.

Armando Mendoza, economist

“There are two large groups that control the bulk of the agro-industrial products that are consumed in Peru, so how can we ensure that when the tax is lowered, these are not appropriated by the intermediaries?”

Source: Larepublica

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